There is not long left to apply for the government’s Help to Buy scheme. This equity loan scheme has existed in various forms since 2013, helping first-time homebuyers in England to get on the property ladder.
Hundreds of thousands of people have used this flagship initiative to purchase their first home, but the latest version of the scheme will be ending earlier than expected – with no alternative scheme planned to replace it.
This means that anyone wanting to take advantage of a Help to Buy loan must do so before submissions close on 31st October 2022. It’s best not to wait too long if you plan to apply, as a lot of last-minute applications piling up could leave you disappointed.
Here’s everything you need to know about the Help to Buy scheme ending, and what you should do if you want to purchase your first home before it closes next month.
When it was first launched in 2013, then-Chancellor George Osborne was aiming to kickstart the property market again. It was only intended to be a temporary scheme, with the second phase running from 1st April 2021 to 31st March 2023.
While the first phase was open to all homebuyers, the current version of the initiative is only open to first-time homebuyers. It also introduced regional price caps, with the government offering a loan of up to 5%–20% (40% in London) to help people buy their first new-build property with a 5% deposit.
This means that homebuyers will have a smaller mortgage, making it more affordable for people to buy their first home. However, the scheme is coming to its planned end, with no extensions or replacements in the works.
With a newer application deadline of 31st October 2022, prospective buyers have until the end of next month to reserve their property and submit an application. However, people shouldn’t rush into things just to make the deadline – be sure to think about whether this route is right for you.
Though the Help to Buy scheme doesn’t officially end until 31st March 2023, people may not realise that applications are closing much sooner than that. This final date is the deadline for completing the purchase and collecting the keys for your new property.
Before you can get to that point, you must submit a Help to Buy loan application by 6pm on 31st October 2022. The off-plan home you’re reserving must be physically finished by 31st December 2022, with a complete build ready for you to live in.
If you don’t meet these deadlines, then unfortunately you will no longer be eligible to receive the Help to Buy equity loan. Your homebuilder must return your reservation fee and deposit and release you from your contract unconditionally. Even if the sale falls through, you may still have to pay fees to your solicitor and/or estate agent.
Since the application deadline is looming, it can be tempting to jump in quickly, but property is a serious investment. You shouldn’t apply for the scheme unless you’ve evaluated all your options, and a Help to Buy property with a tailored equity loan is the best choice for your circumstances.
The cost of living crisis and rising property prices might cause a bit of panic, with first-time buyers not wanting to lose this chance to get their foot in the door. However, it’s essential to sit down and think through the long-term financial implications of a Help to Buy loan before you commit to it.
To apply for the current Help to Buy scheme, you must be at least 18 years old and able to afford fees and interest payments. You must also be a first-time buyer – meaning you won’t be eligible if you’ve already owned a residence in the UK or abroad.
You can either apply as an individual or make a joint application, but other applicants must also meet the eligibility criteria. Joint applications are possible regardless of your marital status – you can apply together if you’re married, civil partners, or cohabiting.
When it comes to property eligibility, not all new homes are accepted in the scheme. You must buy a new-build property from a homebuilder registered with the Help to Buy scheme, which doesn’t exceed the maximum purchase price limit for your region.
How it works is that you’ll pay a deposit of at least 5% of the purchase price, and arrange a mortgage for at least 25% of the purchase price. You’ll then borrow a government loan of between 5% to 20% of your new home’s purchase price (or up to 40% in London).
Help to Buy loans are interest-free for the first 5 years, though they require a management fee of £1 a month. During the sixth year, you’ll start to pay monthly interest on the loan in line with the CPI (Consumer Prices Index) + 2%. The ideal scenario is to repay your loan before interest kicks in.
You can make repayments at a minimum of 10% of the property’s market value, reducing the interest you’ll continue owing until you pay the loan off in full. Otherwise, you’ll only have to repay in full when the loan term ends (or you break the terms and conditions), or when you pay off the mortgage or sell the home.
If you’re interested in using this equity loan to purchase a Help to Buy home, you’ll need to get in touch with a Help to Buy agent in your region. Or, if you aren’t sure whether this equity loan is the best choice for your needs, you could also consider:
Of course, these aren’t the only ways to find housing finance, but they’re the most common government-sponsored options at the moment. Whichever route you go down, remember to choose carefully if you’re buying a new-build home, only choosing a reliable developer.
You should always make sure that your new home-to-be has a building warranty in place for additional peace of mind. With a structural warranty from a trusted provider like Architects Certificate, you can be confident that you won’t lose your investment to repair costs later on.
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